My 2 paisa on the topic.

India is not a dictatorship like China, it will take another Mudi government to get there but I digress.

There are laws in India and RBI, government need to work in ambit of law.

To ban Bitcoin government needs to make amendment to ITA act, making exception for Bitcoin as "Virtual currency is not an electronic document". Only center and not RBI can do this. One of the many reasons RBI stays away from Bitcoin is that it cannot amend ITA to ban virtual currency or it may have done so long time back. This is what law firms means by "under current legal framework bitcoin is legal" because it fits the definition of electronic document.

RBI has to amend FEMA, RBI act ot declare it a currency, which I doubt it will do. Declaring Bitcoin currency opens a pandora's box for central banks. This is why RBI wants SEBI to regulate it as "virtual good" or movable property. SEBI is pushing back saying it is not a commodity.

The government can ban Bitcoin but it will need amendments to the act.

Banning is hard to enforce and will push Bitcoin underground. India is not like China and it is not easy for central government to enforce compliance. Remember AP government is part of Ethereum alliance. It is easier for Finmin/government to regulate it, get the taxes and keep an eye on ledgers to track money laundering.